Thursday, May 13, 2010

State of the Market - 5/13/10

This is all I have for today as I have some family commitments to attend to - the overall market looks very bearish on the daily charts of pretty much every index or ETF, but what would make me hesitate is that EVERYONE sees this. Everyone I read right now is talking about the exact same thing - how the markets have spiked back up on consecutively lower volume sessions right into the heart of what should be resistance. Naturally, this has most people expecting a breakdown soon.

I do think the market is headed lower, but it just seems so obvious for it to happen right now with this setup. Maybe it will - maybe that's how the market is going to trick the majority this time. Maybe too many people like me think a breakdown is too obvious and therefore won't play it and then it will happen.

I remain totally in cash and pretty much disengaged from things overall. If I were to get short, I think I would rather have a false break above 1180 and 2450 on the S&P and Nasdaq respectively from which to get short. It would send early shorts running and just put enough doubt into traders and computers about whether the market will really pull back or instead go on another liquidity-driven low volume rally. I think overall that "breakout fakeout" would be a safer setup. We'll see if we get it.

It remains difficult to swing trade right now so I'll probably continue to stay out of things. No need to do much when there aren't a lot of great opportunities in front of you. I'll continue to keep an eye on gold for a pullback (which perhaps started today) and for the right time to perhaps get short, but that's it. Good luck out there if you're trading.

2009 messed up a lot of my "system" and because of that I have been hesitant for a while. If you follow the CANSLIM strategy or the IBD way of market timing, you would know that they (IBD) were constantly whipsawed in 2009. They would put the market in rally mode, it would go nowhere then fall back down, and then they would put it in correction. As soon as it went into correction, the market moved back up. It happened several times. this is not meant to disparage them - it is just to prove that this market has changed and even historically "proven" systems have not worked the same for a while now. That's what makes things so tough for me personally - if historically proven things don't work, what strategies do work?

I beg to differ with regards to 2009. If ever there was a year when there were many whipsaws it was 2008 but in 2008 you made money!!!

2009 was relatively smooth sailing compared to 2008 with many quality stocks setting up in bases and breaking out in July/August 2009 after a follow through when Chinese stocks were leading the market. Then again in November/December 2009 after a follow through again Chinese stocks lead. Then again in February/March 2010 when Semis/Entertainment stocks like CREE, LSCC, CRUS, NFLX based and broke out in March.

I have read every single one of your blog post for the past year or so and you have doubted all the follow through signals. AS opposed to buying into quality stocks breaking out of bases. Admit it! You have been guilty of this.

Overall Market Timing Score

March 20, 2014 -2March 19, 2014 +1(Max Score +6, Min Score -6)

The Market Timing Score has six factors that I record on a daily basis. These include breadth indicators, moving average indicators, accumulation and distribution indicators, and overbought and oversold indicators.

The max score of the Market Timing Score is +6, but this is very rare. Typically a score of +4 or +5 tells you that the market is very bullish. A score of +3 or +2 tells you that the market is bullish, but there are a few reasons for concern. A score of +1 or 0 tells you that cash is the best place to be. The scores work the exact same way on the negative side for bearish markets.

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Chart Swing Trader is a website intended for the education of online stock traders. The website is an information service only. The information provided herein is not to be construed as recommendations to buy or sell stocks of any kind. They are simply the opinions of the author. It is possible that the editor of this blog may own, buy, or sell stocks presented. All investors should consult a qualified professional before trading any stock. The author is not an investment advisor. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts made by the author are committed at the reader's own risk, financial or otherwise.